What is PMI — cost, calculation, and how to get rid of it
What is PMI (private mortgage insurance)? It protects your lender, not you. Learn what PMI costs per month, how it is calculated, when it cancels, and how to avoid paying it — with a live payment calculator.
Private mortgage insurance is what a lender charges you for the risk of lending more than 80% of a home's value. It protects the lender if you default. It does nothing for you — which is why every dollar of it is worth removing as fast as you reasonably can.
What drives the price
Two things, mainly:
- Loan-to-value. 5% down is priced very differently from 15% down. Each step toward 20% cuts the rate.
- Credit score. The same loan can cost three times as much in PMI at a 620 score as at 800.
The scenario below starts at 15% down so you can see the PMI line in the breakdown. Change the down payment to 20% and watch it disappear — then look at what the suggestion panel says about how long it would take you to save the difference.
The two dates that matter
PMI has a cancellation point and a termination point, and they are not the same. Once your balance hits 80% of the original purchase price, you can ask your servicer to remove it. If you never ask, they must drop it automatically at 78%. The gap between those two dates is often a year or more of premiums you did not have to pay, so the calculator marks both.
Four ways out
- Put 20% down. No PMI, and a smaller loan.
- Pay down to 80% faster. Extra payments hit principal directly, and the schedule shows the month you cross the line.
- Request removal at 80%. Free, and it needs nothing but a phone call — and sometimes an appraisal.
- Improve your credit before you lock. Moving up a band lowers the premium for as long as you carry it.
External references
- CFPB — When can I remove PMI? — official Consumer Financial Protection Bureau guidance on the Homeowners Protection Act, automatic cancellation at 78% LTV, and how to request early removal
- Investopedia — Private mortgage insurance — how PMI rates are calculated, what credit score and LTV ranges cost, and the difference between borrower-paid and lender-paid PMI
- The Balance — What is PMI? — complete guide to PMI cost ranges, cancellation rules, and when paying PMI can make sense vs waiting to save 20% down
- NerdWallet — Private mortgage insurance — PMI cost estimator, tips on how to avoid it, and comparison of PMI vs FHA mortgage insurance premiums
- Bankrate — PMI guide — how PMI affects monthly payments, break-even analysis on larger down payment vs paying PMI, and lender comparison tips
How much does PMI cost per month?
Typically 0.19% to 1.85% of the original loan amount a year, divided into monthly payments. On a $361,250 loan at 0.55%, that is about $166 a month. The rate depends on your credit score and how much you borrowed relative to the home value.
When does PMI go away?
You can request removal once your balance reaches 80% of the original purchase price, and the servicer must terminate it automatically at 78% — a right guaranteed under the federal Homeowners Protection Act. Requesting it at 80% rather than waiting is usually worth several hundred to a few thousand dollars.
Is PMI ever worth paying?
Often yes. Waiting years to save a full 20% means paying rent and risking price increases in the meantime. The question is not whether PMI is bad but whether the extra cash is better spent on the down payment or kept — which is exactly what the savings runway in the calculator prices out.
Related: 15-year vs 30-year · What loan-to-value means · How we estimate PMI